CNN Fights the Free Market Argument

     Free market solutions have become a radical suggestion in today’s trend of bloated government intervention.

     Daniel Mitchell, senior fellow at The Cato Institute and a member of the Business & Media Insitute’s Board of Advisors, discovered this when he appeared on “Your $$$$$.” Mitchell inadvertently sparked controversy Nov. 23 by commenting that “too much taxes, too much spending, and too much regulation” are the problem.

     Host Ali Velshi challenged Mitchell. “Did you just say we have too much regulation already?” he asked, and quipped that Mitchell and all the other who believe there’s too much financial regulation could “have a meeting in phone booth.” “You don’t really believe that, right? You’re kidding me.”

     Defending his laissez-faire claims, Mitchell countered, “If government was the solution, then Cuba and North Korea would be economic paradises and countries like France and Germany wouldn’t be basket cases.”

     Frustrated with Mitchell, Stephen Leeb, president of Leeb Capital Management and frequent “Your $$$$$” guest, responded “This is not the time for ideology” – a the size of this economic crisis is so large that government must intervene. “If we lose this battle… you can flush down capitalism…That’s the shortest road to socialism, communism, anything you want to call it. Capitalism will not prevail if we follow his advice.”

     Seeming unable to accept that Mitchell wanted deregulation, Velshi concluded the segment promising to free market Mitchell that he would try again to “get you to agree that there’s some role government can play in rebuilding this economy.” 

     This debate between free market solutions and government intervention is as old as the Great Depression itself, when President Franklin Delano Roosevelt tried to stimulate the economy. Host Christine Romans mentioned that many “think that President-elect Barack Obama could take a page from FDR’s playbook to create more jobs” through massive amounts of spending.

     Looking to government solutions, Chrystia Freeland, managing editor of the Financial Times, recommended that Obama throw money at infrastructure projects like roads to create jobs. Paul La Monica, editor for CNNMoney.com, echoed many many cheerleaders for government intervention when he called the expected stimulus by Obama a “new-New Deal.”

     It’s strange that these analysts should so eagerly turn to government as the answer, since history suggests that government intervention in a time of crisis creates artificial solutions and worsens the problem.After spending four years examining FDR’s record, two UCLA economists, Harold Cole and Lee Ohanian, blame FDR’s economic recovery plan for delaying an end to the Great Depression.

     “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies,” they remarked in a UCLA news release [1] covering lessons relative to today’s weak economy. They “blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law” for the seven years of slow economic recovery. Ironically their work demonstrates “that the recovery would have been very rapid had the government not intervened."